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Facebook’s Mobile Advertising Platform

The use of online platforms, particularly social media sites, to advertise has been slowly growing in popularity. Some of these sites, take Facebook as an example, offer companies the ability to target specific demographics through their large numbers of users. With its 172 active monthly users, Facebook proves to be a very valuable tool for getting the word out there on a particular product or service. This is an extremely business savvy and effective way to advertise, especially for companies geared towards younger crowds, who make up the majority of the users on these sites.

Facebook pulled in $3.8 billion from advertisements in the second quarter of this year. From January to May of 2015, through the ads generated on its website, Facebook’s IQ group (its in-house consumer research division) estimated that around 30% of the resulting sales took place on a mobile device. The convenience of clicking through a phone to a company’s webpage combined with the strategic matching of ads with a specific user’s profile all led to a higher payoff for Facebook.

Using Facebook as an example, it can be shown that online advertising can be modeled as a sponsored search market. Companies pay Facebook to place their ads on users’ news feeds and Facebook in return tailors these advertisements to users that, based on their profiles, would be most interested. Complex algorithms sort profiles into different groups based on age, gender, pages liked, friends, etc. Depending on the type of ad, a different group, the “best fit” group, of users will see it. This leads to a higher click number, generating more profit for both the companies and Facebook. All together, it’s a win-win situation for everyone, except the consumer perhaps, who will end up spending money on something they may not have intended to buy.

http://www.wsj.com/articles/facebook-says-nearly-one-third-of-online-shopping-transactions-are-on-mobile-devices-1445853601

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